Thousands of Chinese retail investors unleashed their frustration on the last day of the Year of the Snake, filing a barrage of complaints against UBS SDIC Fund Management over an abrupt valuation change that amplified losses in the country's only silver fund, despite the firm's subsequent remedial efforts.
More than 200,000 individuals lodged complaints against the fund operator following the controversial adjustment on February 2, according to Xiaofei Bao, an online Chinese consumer protection platform. The outcry highlighted widespread discontent among holders of the UBS SDIC Silver Futures Fund LOF, a listed open-ended fund managed by the joint venture between Swiss bank UBS and a unit of state-owned SDIC Group.
The turmoil stemmed from a dramatic silver market crash on January 30, when global prices plunged more than 30 per cent from around US$121 per ounce. Shanghai futures contracts, constrained by a 17 per cent daily price limit, failed to match the pace of the downturn on overseas exchanges, widening the disparity between domestic and international prices.
In response to this volatility, UBS SDIC made a pivotal switch after trading closed on February 2. Without prior notice, the firm changed the valuation benchmark for its UBS SDIC Silver Futures Fund LOF from Shanghai Futures Exchange settlement prices to international market prices.
This unannounced shift dramatically worsened investors' losses. What holders had anticipated as a drop capped at about 17 per cent—aligned with the domestic futures limit—ballooned into a 31.5 per cent decline, catching many off guard and fueling accusations of unfair treatment.
UBS SDIC, operator of China's sole silver fund, attempted remedies to address the backlash, but these measures have fallen flat with numerous investors, as evidenced by the massive volume of complaints pouring in on Monday.
The incident underscores the challenges faced by retail investors in navigating extreme commodity price swings, particularly when domestic markets are insulated by trading limits that do not reflect global realities.
